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FAR and DFARS › FAR Part 27: Patents, Data, and Copyrights › Subpart 27.2

FAR 27.202-3 Adjustment of royalties.

The codified text (eCFR, as of 2026-10-02). Under the Revolutionary FAR Overhaul ↗, agencies follow class deviations with new text for many parts while the formal rules go through the Federal Register: check the solicitation and your contract's clauses, which rule.

In plain English

This section tells the contracting officer what to do when royalties paid or payable under a contract or subcontract look inconsistent with Government rights, excessive, or otherwise improper. The officer must report the facts to the office handling patent matters and act to protect the Government, including demanding a refund or negotiating a lower royalty in appropriate cases. It matters to contractors because royalties they charge may be challenged, reduced, or refunded.

Applies to: Contracting officers handling royalties under Government contracts and subcontracts

What it requires

  • Promptly report the facts to the office having cognizance of patent matters for the contracting activity concerned
  • Promptly act, in coordination with the cognizant office, to protect the Government against improper royalty payments
  • In appropriate cases, demand a refund under any refund of royalties clause or negotiate a reduction of royalties

Key terms: royalties · contracting officer · cognizant office · royalty-free license · refund of royalties clause

Written by AI from this section's text. A guide, not legal advice: the text below rules.

The text

(a) If at any time the contracting officer believes that any royalties paid, or to be paid, under a contract or subcontract are inconsistent with Government rights, excessive, or otherwise improper, the contracting officer shall promptly report the facts to the office having cognizance of patent matters for the contracting activity concerned.

(b) In coordination with the cognizant office, the contracting officer shall promptly act to protect the Government against payment of royalties—

(1) With respect to which the Government has a royalty-free license;

(2) At a rate in excess of the rate at which the Government is licensed; or

(3) When the royalties in whole or in part otherwise constitute an improper charge.

(c) In appropriate cases, the contracting officer in coordination with the cognizant office shall demand a refund pursuant to any refund of royalties clause in the contract (see 27.202-4) or negotiate for a reduction of royalties.

(d) For guidance in evaluating information furnished pursuant to 27.202-1, see 31.205-37. See also 31.109 regarding advance understandings on particular cost items, including royalties.

Sections it refers to

← 27.202-2 Notice of Government as a licensee. · 27.202-4 Refund of royalties. →

Rule changes for FAR Part 27

Source: eCFR, 48 CFR chapters 1 and 2 (GPO GovInfo bulk data) ↗. Plain words for the terms: glossary.

FAR 27.202-3 Adjustment of royalties · SpendQuery